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Willisms

« Principles Trump Politics | WILLisms.com | Wednesday Caption Contest: Part 41. »

Trivia Tidbit Of The Day: Part 254 -- Better, Cheaper Cable, Phone, & Internet.

Telecom Deregulation-

While gas prices get inordinate levels of media attention these days, I am bothered a lot more by rising costs in other areas. Cable bills, for example.

With oil, you have a global market. You have burgeoning demand in China, India, and other emerging economies. You also have regimes around the world with varying degrees of psychoses manipulating, as best they can, the supply of oil in the global marketplace. Oil companies themselves are also at the mercy of these enormous geopolitical forces. They don't-- they can't-- sit around in some smoke-filled room, fixing the price of a barrel of oil or gallon of gas.

Television services (cable, etc.), meanwhile, while certainly not essential, are entirely necessary for those of us who follow politics and sports.

And cable bills are completely outrageous these days. Most people pay for dozens or hundreds of channels they don't want. Then there's the local, state, and federal taxes. Worst of all, there's no market competition. If you aren't satisfied with your cable company, your options are limited (.pdf):

The FCC reports that only three percent of the cable communities nationwide were competitive in January 2004.17 This means that cable firms have in effect a monopoly position in roughly 97 percent of local markets nationwide.

It's even worse in Texas.

ZERO zip codes had more than one service provider (.pdf):

videoserviceproviders.gif

Sure, there's satellite. But clearly, fairly or unfairly to DirecTV and Dish Network and so on, most consumers do not consider satellite television to be a reasonable substitute for cable.

These monopolies on cable service are not even organic. They're, in part at least, due to outdated governmental regulation.

Fortunately, for Texans at least, there is help on the way. The Tax Foundation notes that the recently passed 2005 Competition Act will help to break up the monopoly power of cable companies in Texas:

With the recent passage of an Act Relating to Furthering Competition in the Communications Industry, the Texas legislature has made great strides in telecommunications deregulation.

For many years, regulations have limited competition and innovation in Texas telecommunications markets. The 2005 Competition Act will promote competition by eliminating entry barriers in two markets and deregulating pricing in a third market. Taken together, the three major reform measures of the 2005 Competition Act will hasten the movement toward an innovative, efficient telecommunications marketplace in which multiple service providers compete to offer consumers a package of voice, broadband Internet access, and video programming services.

While the results will not necessarily be immediate, they might very well be, and over the next few years we should fully expect and demand competition to give consumers more and better choices, for relatively less money. As High Definition television and other new technologies take off, it is exciting that Texas' legislators have empowered consumers in the coming years with market-based choices.


Source:
The Tax Foundation
.

-------------------------------------

Previous Trivia Tidbit: Perceptions On The Economy.

Posted by Will Franklin · 31 January 2006 09:57 PM

Comments

Two things.

First, just to clear up curiosity, how can the Tax Foundation report that no zip codes in Texas have more than two cable service providers? I know for a fact that both Grande and Time Warner service my zip code. Did I miss something in the footnotes?

Second, how is it that I have to learn from Pittman that you're in Austin now?

Posted by: D. Hamilton...wait, too obvious...call me Dan H. at January 31, 2006 10:33 PM

Their info could be wrong, but I am pretty sure Grande has limited penetration in any given zip code. I wish I had the opportunity to get Grande, for example.

But I think the point remains that there are few truly competitive areas in the entire state. If all of Austin, even, had the choice of Grande and Time Warner, what are the odds of a price/service war? Pretty high, I'd say. One would offer "free" HBO. The other would do the same, plus charge less. The other would offer a free HD DVR upgrade. The other would do the same, but knock off another few bucks off the bill.

And so on.

Posted by: Will Franklin at January 31, 2006 10:39 PM

You also have regimes around the world with varying degrees of psychoses manipulating, as best they can, the supply of oil in the global marketplace. Oil companies themselves are also at the mercy of these enormous geopolitical forces. They don't-- they can't-- sit around in some smoke-filled room, fixing the price of a barrel of oil or gallon of gas.

Will, you state this as if it were fact but this is incorrect. OPEC is producing at FULL capacity. New wells are being drilled daily. There are NO regimes restricting supply to manipulate prices. OPEC may set production targets but they have no intention of meeting them, they are far exceeded. Oil companies can not restrict the price of a barrel of oil because the price is based on a world wide market. They can and DID however manipulate the price of a gallon of gas by shutting refineries to restrict demand.

Posted by: thomas at February 1, 2006 09:11 AM

Gonna need some links, Thomas.

Posted by: Hoodlumman at February 1, 2006 10:41 AM

http://www.billingsgazette.com/newdex.php?display=rednews/2004/07/11/build/business/40-new-refineries.inc

http://www.pcps.org/pdf/FASB_Conditional_ARO_Obligations_ED_TIC.pdf

Posted by: thomas at February 1, 2006 11:31 AM

http://www.energybulletin.net/2766.html

Posted by: thomas at February 1, 2006 11:34 AM

They can and DID however manipulate the price of a gallon of gas by shutting refineries to restrict demand.

When? Just before the Hurricanes? Is that what you're refering to?
Your joking, right?

Posted by: Rob B. at February 1, 2006 11:35 AM

Rob, No I am not joking. Restricting supply allows you to make more money from each gallon produced. Put it this way if you can make $50 by producing 10 widgets or $50 by producing 5 widgets which are you going to do? Read the first two links I sent.

Posted by: thomas at February 1, 2006 12:06 PM

Thomas, I understand pricing restriction. I also understand production pricing and refinement. I just disagree with the idea that gasoline prices were effected by big oil reducing refinery capacity.

The increase in gasoline pricing was caused by investor specualtion in the market, decreased oil supply due to the hurricane, the refinery shutdown due to the hurricanes, damage done to the refineries during the hurricanes, the BP gasoline refiner explosion in Texas, Iraqi production concerns, Chavez's decreased oil input and anti-us rehtoric and the increase of emerging economies in trade such as india and china.

However, I'd like to point out that the decision to close refineries wasn't made solely by the oil companies. A lot of the refineries that closed were independants. They closed US operations because they had to pay shipping costs, tarriffs and refinery fees, all the while juggling EPA regulation, safety regualtion, envormentalist hassles and increased insurance and legal liabities. Why wouldn't they consider moving to places like Mexico and middle America where they are not under the same insane enviromental oversite and taxation.

However, the main reason I asked if you were kidding is because the well shut-ins alone effected production to refineries as well as the 40+ types of fuels refineries have to make for Americans due to the differing EPA standards for gasoline emmisions.

I read the links that you have posted and the most telling feature is that there has been no new refineries built here since the 1970's. While i hope that they do build new refineries away from the coasts, I have little faith that it will happen because of the inevitable cases of NIMBY. (Not in my back yard.) People don't want to allow the smells and the pipelines near thier homes.

Likewise, I have stacks of Oil and Gas periodicals that predict peak oil from Opec in 98, 2004 and now 2012. The truth is that no country in the middle east has had a cohesive second wave exploration program happen yet. Once they are subject to picking off all the low lying fruit they will be forced to use 3-d and 4-d seismic, geothermal and geomagnetics to explore deeper and we will see more giant to super giant field discoveries there. Hopefully we won't need oil as much by then.


Posted by: Rob B. at February 1, 2006 01:24 PM

I read them both. Shutting down unprofitable refineries is good economic policy.

Can we assume that you think, Thomas, no new refineries have been built since the 70's is a... maybe conspiracy is too harsh... an "agreement" between all US refinery owners to stick it to us?

Posted by: Hoodlumman at February 1, 2006 01:24 PM

Some of the refineries that were closed were small independents that were priced out, but you are selective reading. The article also talks about the industry consolidating and shutting refineries. What you don't believe that business would make decisions that would cause prices to rise to increase profits?

Rob,
Not only have there been no new refineries built. The most telling aspect is that there has been only ONE license applied for. The price of gas is spiking again and all of the temporary factors you mentioned have past. Even GW has stated the problem is lack of refining capacity. And you are correct the spike had nothing to do with a loss in supply.

Do some research on your own. Check out npra.org and see what they have to say. I am not being a wako communist. This is capitalism and it's best or worst, depending if you own Exxon or Halliburton stock or not.

Posted by: thomas at February 1, 2006 02:36 PM

"Do some research on your own."

That's pretty good. You're all up in the field Rob works in.

Switching gears:

A different angle to all of this "price gouging" bullshit is that high prices encourage conservation and new forms of energy production.

What's wrong with conservation and other forms of energy production that are cheaper and cleaner?

Posted by: Hoodlumman at February 1, 2006 03:20 PM

So Exxon and Shell are restricting production to increase prices so people will use less gas because it is good for the enviroment?

That is brilliant, now you are thinking.

http://www.motherjones.com/news/featurex/2005/05/exxon_chart.html

Posted by: thomas at February 1, 2006 04:16 PM

Thomas, I wasn't selectively reading that. Consolidation and the like go exactly with what I said, as well. If you try to build a refinery in the US you get buried in regs, red tape, EPA, enviromental concerns and mad home owners. Why would you want to build here? However, if you have a plant a add on it's simpler. That's why there have been build ons but no new refineries.
Aside from that, if I make widgets for $50 right now why would I want to add a new plant that will cost me hundreds of millions before I can even begin construction when it will decrease the price of my $50 widget to $25 dollars. Remember that I'll get twice the hassel from the insurance and Enviromentalist.

I'm agreeing with most of what you say, but I'm only pointing out that the reason is more complex that general economics because of the supply nature of petroleum.

The best indication I can give you of the price effect is the monentary response when the President suspended the EPA's additive demands right after Katrina. When the refineries came back on line from being shut down, which was the right move, they were able to focus on makeing 5 types of gas not 50. As a result the prices gradually slipped. As the EPA standards have been tooled back in the prices have gradually risen due to the down time to retool for the variance of additives and the change in price from the oil sag.

The shut it still effected supply, which effected prices because there was less gulf production.

The OCSBBS has some great links from the MMS on the lost production from the gulf.
http://www.ocsbbs.com/Impact_Assessment_Katrina_Jan_2006.htm

Add to all of this that the sheer scope of ExxonMobiles value. What is the percentage of profit to a company of that size? And when you look at the meteroic rise in the price of oil how can people expect that oil and gas companies don't make a profit from existing production?

Are ExxonMobil and BP and the like innocent angels? Hardly. But the ability tho effect the oil supply is a global feature that no one element can control.

Posted by: Rob B. at February 1, 2006 05:12 PM

We so threadjacked this post

Posted by: Rob B. at February 1, 2006 08:29 PM

Rob,
I can appreciate what you are saying. However my point still stands. I believe the consolidation of the oil companies has encouraged them to shut refineries and I do think that it is a deliberate decision to restrict supply. I do not believe that a company is going to say. "This plant is not as efficient and we can get enough extra prdn out of plant x that we could shut this one down, but that would be restricting supply and that would not be nice to all the SUV drivers who are driving up demand." But I have a hunch that it goes beyond that, no proof unfortunately, that even not so inefficient plants have been shut for the same purpose. 36 billion in 05 can't be wrong. oh yea, cable, right. Uh sorry.

Posted by: thomas at February 1, 2006 09:03 PM

I understand your point and will say that the potential for that to be part of the cause in most definetly there. However, I'm going to stick with the fact that there are to many factors in play for that to be the sole driving force. BTW, Shell just released their figures to a record UK profit. Still, I can say for a fact that we are drilling several wells now that were iffy at $30 oil that are way, way economically sound at $65 dollar oil. Remember oil went from $42 to $75. We made a lot of unexpected money from producction we already had. We also lost on some wells that we had to shut in from the impending hurricanes that later wouldn't come back on line.

BTW, on cable, I may ditch mine and get dish network so i can watch more HD hockey.

Posted by: Rob B. at February 2, 2006 12:05 PM